WASHINGTON (Bloomberg) — US tyre companies are being harmed by products from China, a US agency ruled, setting up a decision by President Barack Obama on whether to impose tariffs or quotas on America's biggest source of imports.

The US International Trade Commission ruled 4-2 that U.S. tyremakers are being hurt by $1.7 billion in imports from China. The United Steelworkers union, which represents workers at tyre factories, filed the case. US tyre companies including Akron, Ohio-based Goodyear Tire & Rubber Co. and Charlotte, North Carolina-based Goodrich Corp. haven't taken a position.

The ITC will next recommend what level of tariffs or quotas should apply to the Chinese imports, and Obama would have to make a decision on the so-called safeguard case by September.

The case is the first test for Obama on trade with China, after he vowed during his presidential campaign last year to help unions or domestic industries seeking relief from foreign competition. Since the election, he has also pledged to avoid protectionism so as not to exacerbate the global recession.

The United Steelworkers want Obama to cut imports of automobile tyres from China by more than half to 21 million, the level in 2005. China sent 46 million tyres to the US in 2008.

US tyre dealers and importers have said domestic tyremakers such as Goodyear and Goodrich have no interest in the low-cost tyre market that China serves. The US companies make branded tyres, which are often sold to vehicle manufacturers. The Chinese imports are typically not branded and sold to consumers through low-cost outlets such as Wal-Mart Stores Inc., according to GITI Tire Pte Ltd., China's largest tyre producer.

GITI Tire argued in testimony to the ITC that declines in auto sales, automation of tyre production and increases in raw material costs are driving the increase in Chinese imports.